Helping Businesses Survive The Recession

Every week the roll call of the latest failed businesses echoes across news and blog sites making depressing reading for us, but this is nothing compared to the devastation going on in the lives of those working in or owning those businesses who have lost their incomes and livelihoods and in many cases much more.
For the employees of these failed businesses there are a number of aspects which whilst important, are not the subject of this post, but which I will address at another time.

This article focuses on the the business owners and what effects the failure of the business can have on them, what can be done to reduce the pain in the event of the business failing, but most importantly, some things that may help to reduce the risks of the business failing in the first place.

First and most important for the current climate is to maximise the protection that a business has against what is probably the highest risk of the moment - delayed payment of invoices or worse, non payment including that resulting from the failure of a debtor.

The effect of either of these on the cashflow of any business can be catastrophic at the best of times let alone during the current climate. You see there is a domino effect taking place behind the scenes and whether or not you realise it, your business is a domino standing among other dominos working away at what it does as best it can without any real awareness of which other dominos are falling and if, how or when the chain reaction of these falling dominos will affect your business and cause it to fall also.

Creditors in businesses, mainly the banks, have much more awareness of this than most of the businesses which depend on them via the loans and/or overdrafts provided by them and for this reason they are much more nervous than they have been in recent years regarding their exposure to businesses and the losses they will suffer in the event of the failure of any business to which they have extended credit. Sadly, it is often the case that as a result of these fears, banks have been increasingly been known to revoke overdrafts to reduce their exposure in the event of a business failing, but it is this action which causes the business to fail through cashflow failure.

Banks however are not the only creditors in businesses, all suppliers which offer credit in the form of 30 day (or longer) invoicing terms are effectively providing a facility very much like the bank does with an overdraft, and they too are concerned in case a business customer fails with outstanding invoices and are highly motivated for their own survival to reduce their exposure leading to reductions in invoicing terms or changes to advance payment terms instead.

Both these types of creditors provide a vital buffer of cash which most business depend on and without which they could not survive and the very real risk of losing this buffer must be recognised and addressed if the business is to protect itself from it.

In addition to the risks presented by creditors, there is the more obvious risk posed by debtors. Most businesses have more debtors in the current climate than in recent times for all the reasons we know or can guess about, but in addition to these and the problems in both lost revenue and the lost time and cost of recovering it there are your potential debtors - those customers to whom you offer invoicing terms but who may fail whilst you are exposed to unpaid balances.

These are the most visible and common risks to businesses in the current climate, but in addition to these there are other risks that are always present and which can also cause the failure of a business and which should never be overlooked even when as currently, more visible risks seem more likely or important to take care of.

A risk which can devastate a business, usually through loss of confidence others (mainly creditors) have in the businesses ability to survive, is the loss of an individual viewed as key to the business. Whether it is the sole business owner, a partner a director or a manager, if there are key people in your business who are viewed a crucial to it's ability to trade or even survive then there must be a contingency in place to ensure that the business can continue to trade effectively in the event of that person being removed from the business through serious illness or even death. This is important on two levels - first and most obvious is to ensure the business can indeed survive such an event and continue. Second and possibly even more important is to give comfort and confidence to the creditors (banks & suppliers) of the business so that they do not react with fear and withdraw the credit facilities on which the business depends.

Probably the most important risk that a business owner faces is where personal guarantees have been provided to creditors, be they banks or suppliers. If a business owner is a sole trader or a partner (excluding limited liability partnerships) then by default the business debts are automatically also personal debts and creditors can take any personally held assets to cover the debts of the business. Likewise in the case of a limited company or LLP, if a shareholder, director or partner has provided a personal guarantee the same applies.

So, in the case of a business failing in these circumstances the business owners will be forced to liquidate any assets owned including even their family home to settle the debts of the business. Refusal or procrastination on this will usually lead to bankruptcy.


These are a lot of risks, all very real and all very often not addressed properly by businesses which is a contributing factor to the daily business failures we currently read about.

There are you'll be pleased to hear solutions to all of these which can be implemented by businesses and business owners to give themselves greater protection against them and thereby reducing or removing the likelihood of suffering the devastating results which could otherwise occur.

To discuss the size, impact and solutions to any or all of these risks you can call 0845 003 0065 for a free initial consultation or read more and complete and online enquiry form at www.theinsurancehelper.co.uk

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Internet Use Doesn't Make You An Expert...

In the internet age, many people quite rightly gather information on a topic of immediate interest as part of a decision making process. This is great!

What often happens next is that after undertaking some research and gathering some knowledge you may feel sufficiently enlightened on the subject matter to go right ahead and make that decision on the basis of the knowledge you have now garnered. This is also great!

There is however a danger that the information and knowledge you have collected is not actually detailed enough or substantial enough for the 'right' decision to be made.

There are many areas where if the wrong decision is made it doesn't really matter too much, other areas where it would cause a bit of an issue and some where the consequences of a poor decision could be disastrous.

Financial Services is one of these areas.

You see, whatever you do for a living; Doctor, Firefighter, Lawyer, Telephone Engineer (the list is endless but you get the picture) - you have probably received substantial training both before and during the job and if I (your humble author) were to attempt to do your job for a day either from my current ignorant position or after a day or 2 of internet research, chances are I would screw it up and depending on the job in question the consequences could range from inconvenience to fatality.

Financial Advisers are pretty qualified and experienced at helping people make correct financial decisions. Even the humblest 'Insurance-only' adviser will generally hold qualifications such as CF1, which involves some 60 hours study and the passing of a 2 hour exam. Mortgage Advisers will also hold CF6 or similar, which is another 70 hours study and exam.

An IFA will need at least CF1 to CF5 or equivalent which is a total of 280 hours of study and 5 exams, although most also hold CF6 and an increasing number either hold or are working towards attaining Diploma status which requires a minimum further 400 hours of study across 4 additional exams.

In addition to all of the hours of study and exams detailed above, all authorised advisers are required to accumulate a further 56 hours of 'Continuous Professional Development' each year to ensure they stay on top of their game - this is in addition to actually doing the job every day.

The amazing thing is the number of people who decide that they know what financial products they want or need and through a little or a lot of online research find it and buy it.

So, unless your knowledge and experience in financial matters is at least as robust as that of a professional, wouldn't it be insane to make such important and potentially life-changing decisions yourself? read more....